After State Bank of India (SBI), India’s largest bank, slashed interest rate on home loans, other lenders including ICICI bank and HDFC are likely to follow suit and reduce home loan rates.

Buyers who shift their home loan from one bank to the another are treated as new borrowers by lenders, making them eligible for the new interest rates.(HT Archive)

After State Bank of India (SBI), India’s largest bank, slashed interest rate on home loans, ICICI Bank followed suit, today. ICICI slashed interest rates by 0.15% to 9.15% for women borrowers while 9.20% for all other borrowers on loans up to Rs 75 lakh.These revised rates will be applicable from November 1 to November 30 this year.

After the RBI policy on October 4, ICICI had reduced its MCLR or the minimum lending rate by 0.10% to 8.95% for the one year period.

Other banks are also likely to announce interest rate cuts, soon.

Keki Mistry, Vice Chairman and CEO of country’s largest mortgage player HDFC, said, there is scope for further reduction of interest rates of about 0.10-0.15%. HDFC will review its rates by tomorrow and decide soon, he said.

Dipak Gupta, Joint Managing Director, Kotak Mahindra Bank said, “We recently revised (October 6) our base rate downward by 10 bps (0.10%) to 9.40% p.a., where both new as well as existing customers have benefited. Interest rates have softened. The bias is southward, given that CPI inflation is likely to average little over 5% in Q4FY17 and WPI inflation for September has slowed marginally. Banks have started reducing interest rates and transmission too is happening gradually.”

On Wednesday, SBI cut its home loan rates by 0.15% to 9.15% — a six-year low — to cash in on the festival season and grow its retail loan book. This limited period festival offer is valid from November 1, 2016 to December 31, 2016, SBI said.

At present, SBI Home Loans provides the lowest interest rates for new home loan borrowers, while existing borrowers are given an option to switch to the new rates after paying a fee.

A private sector bank official said after SBI, many banks will follow suit given the competition in the market and to attract customers towards their loan products.

SBI’s revised rates for new borrowers will be for loans up to Rs 75 lakh. For woman borrowers, SBI has brought down the interest rate to 9.10% per annum from 9.25% while for others to 9.15% from 9.30%. This means that on a home loan of Rs 50 lakh of 30 years, a home buyer can save Rs 542 per month on EMIs.

This rate cut by SBI could increase the pressure on other banks to bring down their interest rates on home loans, consumer, auto and other personal loans.

The rate cut comes after the Reserve Bank of India reduced key policy rates by 0.25% to 6.25% last month.

Amid low demand for loans from big corporates, banks are focusing on growing their business from retail loans, especially home loans.

As per RBI data, housing loans have shot up to Rs 7,86,900 crore as of August 2016 as against Rs 6,74,500 crore in August 2015, a rise of 16.7%.